By Steven Levine
Beijing-based semiconductor company Tsinghua Unigroup has witnessed a recent freefall in the price of some of its U.S. dollar-denominated bonds.
Several factors appear to have coalesced to conspire against the Chinese chipmaker’s notes, including a more challenging financing landscape due to the rise of the U.S. dollar, as well as amid a looming deadline for additional U.S.-imposed tariffs on China’s imported goods.
Also, recent reports that Tsinghua Holdings agreed to transfer a hefty stake in Tsinghua Unigroup did not help matters.
The yield on Tsinghua Unigroup’s 4.75% notes due January 2021 have skyrocketed to roughly 8.7% from a low in February of about 4.7%, and the company’s 5.375% bonds maturing January 2023 have soared to a little more than 9.6% — a rise of 3.5% since early May.
In late January, initial pricing for the three-year and five-year notes, which comprised two tranches of a three-part Reg S transaction, were 5.125% and 5.75%, respectively, according to Bloomberg. Demand had been decent, with each of the bond’s yields having compressed from initial talk by around 25bps.
Investors exercising caution in China’s semiconductor companies
Meanwhile, fears about the financial well-being of certain Chinese chipmakers have intensified recently, as the deadline approaches for additional U.S.-imposed tariffs on the country’s imported goods.
Firms such as Tianjin Zhonghuan Semiconductor (002129) and Shanghai Sinyang Semiconductor Materials (300236), for example, have each seen their shares plunge.
To date, Tianjin Zhonghuan Semiconductor’s stock has slid almost 44.6% since mid-December 2017, and Shanghai Sinyang Semiconductor Materials’ shares are down nearly 43.7% since November 2017.
The declines have come amid rising jitters in China’s tech sector, as the U.S. has been levying duties against the country in conjunction with its Section 301 investigation with respect to technology transfer, intellectual property, and innovation. In the meantime, China has responded in kind, and to date, both countries have slapped each other with a total of US$50bn worth of tariffs on each other’s imports.
